Potlatch Corporation Jerald W. Richards Vice President & Chief - PowerPoint PPT Presentation

Michael J. Covey Chairman & Chief Executive Officer Potlatch Corporation Jerald W. Richards Vice President & Chief Financial Officer February 2014 Investor Presentation

Forward-Looking Statements & Non-GAAP Measures F ORWARD -L OOKING S TATEMENTS This presentation contains certain forward-looking statements within the meaning of the Private Litigation Reform Act of 1995 as amended, including without limitation, statements about future company performance, the company’s business model, direction of markets and the economy, forecast of U.S. housing starts, forecast U.S. lumber consumption, incremental lumber production from the U.S. South, ability to increase or decrease harvest volume to meet market conditions, forecast North American log and lumber exports to China, log, lumber and panel price trends, effect of mountain pine beetle and allowable cut on Canadian supply, debt maturities, management of timberlands to optimize values, real estate value opportunities, real estate business potential and land development potential, and similar matters. These forward-looking statements are based on current expectations, estimates, assumptions and projections that are subject to change, and actual results may differ materially from the forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, changes in timberland values; changes in timber harvest levels on the company’s lands; changes in timber prices; changes in policy regarding governmental timber sales; changes in the United States and international economies; changes in the level of domestic construction activity; changes in international tariffs, quotas and trade agreements involving wood products; changes in domestic and international demand for wood products; changes in production and production capacity in the forest products industry; competitive pricing pressures for the company’s products; unanticipated manufacturing disruptions; changes in general and industry-specific environmental laws and regulations; unforeseen environmental liabilities or expenditures; weather conditions; changes in fuel and energy costs; changes in raw material and other costs; the ability to satisfy complex rules in order to remain qualified as a REIT; changes in tax laws that could reduce the benefits associated with REIT status; and other risks and uncertainties described from time to time in the company’s public filings with the Securities and Exchange Commission. All forward-looking statements are made as of the date of this presentation, and the company does not undertake to update any forward-looking statements. N ON -GAAP M EASURES This presentation presents non-U.S. GAAP financial information. A reconciliation of those numbers to U.S. GAAP is included in this presentation which is available on the company’s website at www.potlatchcorp.com. 2 February 2014 - Investor Presentation Slides

Company Structure & Overview  Converted to tax efficient REIT in 2006  Single level of taxation  Lower cost of capital Potlatch Corporation  Fourth largest U.S. Timber REIT North  1.4 million acres of owned timberland Resource  High margin, low risk real estate business (Timberlands)  Five wood products manufacturing facilities South (REIT)  Balanced business mix  Enterprise value of $1.9 billion Real Estate Market cap (1) of ~$1.6 billion Taxable REIT  Subsidiaries Net debt (2) of ~$0.3 billion  Wood Products  Headquartered in Spokane, Washington  Founded in 1903 (1) Based on February 20, 2014 closing stock price of $40.42 per share. (2) Non-GAAP measure – see slide 25 for reconciliation. 3 February 2014 - Investor Presentation Slides

Potlatch Timberlands Potlatch owns approximately 1.4 million acres of third party-certified timberland in Arkansas, Idaho and Minnesota. We are the largest private landowner in Idaho. Coeur d’Alene Brainerd Minneapolis McCall Boise Sun Valley Timberlands (1) Idaho 805,000 acres Little Rock Hot Springs 410,000 acres Arkansas Minnesota 196,000 acres Total 1,411,000 acres (1) As of December 31, 2013. Excludes 741 acres in Wisconsin. February 2014 - Investor Presentation Slides 4

Resource: Segment Overview  Stable and significant source of cash since REIT conversion  Actively manage timberlands to increase value over time  Increase long-term sustainable yield over time  Maximize non-timber returns; examples include permits, leases, carbon credits  Sell when returns are compelling  Grow via attractive acquisitions  Standalone timberlands, or  Timberlands and associated wood products manufacturing  Increase in 2013 EBITDDA driven by higher Northern sawlog prices (1) Non-GAAP measure – see slide 24 for reconciliation. 5 February 2014 - Investor Presentation Slides

Resource: Harvest Profile (tons in millions) 4.4 4.2 3.9 4.1 3.8 3.6 3.7 3.3  We preserved value by deferring Southern harvest during downturn  Ability to increase harvest as demand increases  Attractive distribution of timber across age classes  Flexibility to monetize sawlog or pulpwood harvests  Approximately 75% of log volume is sold to third party customers 6 February 2014 - Investor Presentation Slides

Timberland Portfolio Activity (acres in 000’s) (1) 218 36 (61) (33) 1,653 1,628 (45) 1,583 (105) (37) 1,468 1,478 (24) 10 1,441 (15) 1,412 (2) 1,427 2006 2007 2008 2009 2010 2011 2012 2013 Acres Owned at End of Period Acres Acquired Acres Sold (1) Includes the sale of the Boardman, Oregon tree farm of 17,000 acres. (2) Includes 741 acres in Wisconsin. 7 February 2014 - Investor Presentation Slides

Real Estate: Segment Overview  Continually assess acreage and maximize value of non-core timberland through sale  Aggressively sold non-core timberland during recession; 2013 is closer to ‘same store’ level  More than 3,000 miles of desirable water frontage  More than 9 million people live within three states of ownership Land Portfolio Non-Strategic Timberland ~15,000 acres Rural Real Estate ~85,000 acres HBU/Development ~115,000 acres 2006 2007 2008 2009 2010 2011 2012 2013 EBITDDA (1) $ 12 $ 21 $ 40 $ 60 $ 79 $ 45 $ 33 $ 22 Core Timberland (1) Non-GAAP measure – see slide 24 for reconciliation. ~1.2 million acres 8 February 2014 - Investor Presentation Slides

Real Estate: Values Are Unique to Each Category CONSERVATION NON-STRATEGIC RURAL REAL HIGHER-BETTER-USE EASEMENT TIMBERLAND ESTATE DEVELOPMENT $400 to $1,000 per acre $500 to $1,500 per acre $1,000 to $1,500 per acre $2,000 to $7,000 per acre 120,000 Opportunity dependent 10,000 to 20,000 acres 80,000 to 90,000 acres 110,000 to 120,000 acres Characteristics: Characteristics: Characteristics: Characteristics: - Habitat related - Fringe of ownership - Fringe of ownership - Property attribute focus - Appropriate payment for - Location disadvantage - Opportunity varies by - Investor interest opportunity sold geographic market - Higher operation cost - Explore proper land use - Selective core lands - Recreation character and entitlements - Capital allocation focus and amenities - Emerging development - Adjacent ownership focus influence LOWER VALUE HIGHER VALUE OPPORTUNITIES OPPORTUNITIES 9 February 2014 - Investor Presentation Slides

Wood Products: Overview Potlatch produces about 650 million board feet of lumber and 160 million square feet of plywood at five manufacturing facilities. Wood Products St. Maries Manufacturing Facilities Bemidji Gwinn Warren 10 February 2014 - Investor Presentation Slides

Wood Products: Segment Overview  We operate four top-quartile sawmills  We sell lumber to wholesalers for use in homebuilding and construction  Our industrial grade plywood mill sells higher grade panels at a premium  We maximize production, which improves fixed cost absorption  Increase in EBITDDA driven largely by higher lumber prices (3) (2) (1) Non-GAAP measure – see slide 24 for reconciliation. (2) Excludes $31 million for Canadian lumber settlement. (3) Includes asset impairment charge of $3 million. 11 February 2014 - Investor Presentation Slides

Industry Growth Drivers Overview  U.S. housing starts are increasing  U.S. lumber consumption is increasing  Canada’s ability to participate in U.S. recovery is limited by effect of the pine beetle and reduction in allowable cut  Incremental lumber production will come from the U.S. South  North American exports to China are robust and here to stay  Log and lumber prices are expected to increase February 2014 - Investor Presentation Slides

Total U.S. Housing Starts (in thousands) Housing starts are recovering, but still far below the long-term average. Forecasters calling for starts above long-term trend in second half of decade. 2,500 Actual (1) Forecast (2) Average Starts Since 1971: 1.5 million 2,000 1,500 1,000 500 0 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15F (1) Source: U.S. Census Bureau. (2) Forecast based on average of 8 different economic forecasting firms. 13 February 2014 - Investor Presentation Slides